The FASB And Accounting For Economic Reality
The article examines a proposal to produce Principle-based Accounting Standards (PBAS) by FASB. It recognizes the errors involved in the proposal and the main concern is the lack of economic reality, which is an extension of social reality. During the examination, the author does find a number of connected consequences of the proposal. They include the fact that should explain the epistemology and ontology of PBAS if its intentions are to be true. FASB has to make institutional facts to define elements of accounting representation, and such institutional facts lack direct referents apart from other similar facts (Lee, 2006). The fourth consequence is that FASB has to explore truthful notion. There also exists evidence, from the post-PBAS comments of FASB, that it has more concerns of consistency and comparability than qualities that will instigate changes in financial reporting.
These points indicate that FASB faces the difficulty of actualizing its proposals. Accountants are indicating confusion over the proposal, and most of them believe that the organization is introducing fictional elements in the design of financial statements (Lee, 2006). The message that the article is passing is that of understanding social reality. Like FASB, many educators fail to address this issue and concentrate on the problems of constructing it. According to Lee (2006), if this trend continues PBAS proposed by FASB in 2002 will end up being just another empty gesture and will not solve the puzzle of financial reports. Its failure will be international given its integration with the IASB.
References
Lee, T. A. (2006). The FASB and Accounting for Economic Reality. Accounting and the Public Interest (6).
